Philippine banks are planning to implement digital money management tools in the next 12 months as new direction by the Filipino retail banking sector to help consumers manage their crippling debt.
A Backbase commissioned study conducted by Forrester Consulting, showed that 60 percent of banks in the Philippines plan to implement digital money digital tools in the next 12 months as 70 percent of consumers in the country said they are struggling to manage debt.
The move to implement digital money management tools also reflected the findings that Filipino banks are the most likely in APAC to cite organizational silos as a key challenge in developing digital money management tools at 78 percent.
The study also showed that digital financial wellness and money management tools, developed by banks as part of an accelerated transition to digital banking, will provide consumers with a range of new tools including spending analysis, scheduling of bill payments, automatic debt repayments, budgeting and more, delivered directly into their pocket via a smartphone app.
Regional Vice President for the Asia Pacific at Backbase, Iman Ghodosi said this as its research also showed that managing debt was the main concern of Filipinos more so than the rest of APAC.
Sixty-seven percent of banking customers in the Philippines said they feel overwhelmed by debt, 60 percent said debt negatively impacts their abilities to pay bills – this leads to more debt – and 63 percent said debt makes building savings difficult. Household debt in the Philippines is at a near-record of over two trillion pesos, said Ghodosi.
“Through advancements in digital technology, banks can now offer digital services to assist in managing debt correctly,” said Ghodosi.
Digital banking has recently exploded in the Philippines, to the point that no more digital banking licenses are being issued for the next three years. Both digital banks and traditional banks are now racing to be the best when it comes to their digital offerings.
Unfortunately, according to the report, trust in digital banks is low with only 18 percent of respondents saying they trust a digital bank, compared to 60 percent for a traditional bank.
“Lower trust in new ways of doing this is to be expected. However, we have seen around the world that the more information and control we can put into the hands of customers to make their own informed financial choices, the more they will trust the organizations providing them with this opportunity,” he added.
This can be addressed through technology. Based on the research, 68 percent of Filipinos use their smartphone to bank. “By building out that interface and offering more tools, digital banks can address the trust issues, and traditional banks can compete in digital,” Ghodosi added.
“Now more than ever, it is important to own the relationship with your customer. We’ve entered the Engagement Banking Era, an evolution that stresses a one unified platform approach for banking. The number one priority in this new era is to completely re-architect the bank around the customer, moving away from siloed technology investments.”
Of the Filipino retail banking business decision-makers interviewed, 80 percent percent said their company is ‘planning to’ or ‘actively expanding’ its financial wellness initiatives and 48 percent said it was of ‘critical priority.’ When asked about spending on digital financial wellness tools, 52 percent said their company plans to spend more over the next 12 months.
When asked what the key challenges are facing their company in developing these solutions for customers, 78 percent of Filipino retail banking business decision-makers said ‘organizational silos’, 70 percent said ‘outdated technology’, 72 percent said ‘lack of understanding of customer needs and outcomes’ and 72 percent said ‘unsure of how to work with/partner with fintech.
“This is fairly normal at this stage of technological adoption to have some challenges, but they need to be addressed,” according to Regional Sales Director for ASEAN and South Asia at Backbase, Riddhi Dutta. “We have seen many banks around the world face similar challenges at some point in their journey. Change is not easy. However, for those institutions who want to take the lead, the slowness of some players is definitely an opportunity for others,” Dutta added.
Ultimately, he said, the winners in all of this will be the banking customers. New apps will increase levels of financial literacy, encourage customers to build better financial habits, help prevent vulnerable customers from making bad financial decisions, help manage debt, and identify risks of vulnerability and financial difficulty far earlier.